Marketplaces vs. Aggregators

Most people wonder if there is any difference at all between aggregator and marketplace models and in all likelihood presume that aggregators and marketplaces are one and the same. This could not be farthest from the truth and there is an ocean of difference.

Offline or online aggregators in any industry or sector have tie-up with multiple service providers but by definition do not offer or throw open those choices to customer. In other words, their offering is that I have tie-up with several providers, you tell me your need and I can fulfil it without you having to worry about what happens behind the scene.

A marketplace, on the other hand, serves multiple needs of customers. Complete information about services available, price of each service, and all related attribute of every service is published. This makes it very easy for most customers to make an informed decision.

Let us take an example to understand this better. Uber is an aggregator where they are aggregating otherwise disparate cab owners. When you book a cab, although the pricing is currently standard, have you wondered if you could compare the 5 cabs next to your place by service rating and see if there is any price differentiation at all? Uber, at least for now, has not introduced such a feature. They “allot” a cab for you, they make the decision on your behalf based on the declared need (source, destination and availability of closest cabs).

Redbus or Comparabus is a completely different beast altogether. They offer a myriad of information, very detailed and up-to-date information even for small and standard partners, extensive user ratings and finally whole range of prices for customers to choose from. They do not say, tell me where to you want to go from Paris and how many people are travelling, I will book a seat for you in some “reliable” bus? Because many qualitative aspects are involved here. What “cheap” and “best” means to one customer might be completely different to another. Hence, the business model is to throw open all combinations, so that customer can make his/her own choice.

Marketplaces provide options to select, filter and sort
Marketplaces provide options to select, filter and sort
Source: (detailed options available)

Which is better?

Now comes the crucial question of which is better. Each is a different business model and each has its own pros and cons. For example, a customer could be overwhelmed about having to make a decision for a quick travel need from one city to another when faced with a marketplace and the same way a user who prefers many details might be annoyed that the company abstracts information and does not wield complete power to her, instead makes the decision on their own in an aggregator business.

Individual businesses make the decision to be a marketplace or be an aggregator based on market dynamics, customer needs, supply and demand, complexity to make a decision and several other factors.

Author is the founder & chief consultant CyberSafeHaven Consulting

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